Types Of Companies That Can Be Formed Under Companies Act, 2013

Companies form business organization has become very popular over the years. The Indian economy has a variety of companies existing in the market such as public company, private company, investments company, limited liability company etc. These are based upon factors such as liability, control, incorporation, transferability of shares etc.

The types of companies under the companies act 2013 are as follows:-

  1. On the basis of incorporation.
  2. On the basis of liability of members.
  3. On the basis of numbers and transferability of shares.
  4. On the basis of domicile.
  5. On the basis of ownership and control.
  6. On the basis of in terms of access of capital.
  7. New kind of company recognized under the act, 2013.

1. On the basis of incorporation

This is one types of companies. The corporate is also classified primarily based up on the mode of their incorporation and incorporation method that is outline under section-7 of the companies act, 2013. In corporation is that day once the corporate acquires a legal identity that’s the day once a corporate takes birth within the eyes of law. Section-20 of the act defines the varied sorts of corporate and their facts. It may be classified into:-

(a) Royal charter company.

If a corporation is incorporated underneath a special chartered granted by the king or queen, it’s referred to as a chartered company. The power and nature of business of a chartered company are defined by the chartered which is incorporated it. Example – The East India company and The Bank of England.

(b) Statutory company.

The company that is formed by the means of a special statute passed by the parliament or the state legislature. Example – The Reserve Bank of India and The life insurance corporation of India act etc. The Parliament both state and centre are empowered to make such legislation for incorporation under the power endowed to them by the constitution of India.

(c) Registered company.

According to section – 2(20) of the Companies Act, 2013, registered company are the companies which get registered under the statute of the companies act. Company are also provided with a certificate of incorporation by the registrar of the company.

2. On the basis of liability of a members

The liability upon the members is also used to classify the companies, it describes the limit to which member will be liable if such liability were to befall upon the company. It may be classified into:-

(a) Companies limited by shares.

According to section – 2(22) of the companies act 2013 the liability of the members of such a company is based upon the numbers of shares kept unpaid. This liability against the share kept may be brought to the authority. Once the payment towards the security is made by the shareholders or member then no liability beyond that is placed upon such members. The liability is also enforced during the corporate existence and even throughout its winding up process.

(b) Companies limited by guarantee.

According to section – 2(21) of the act 2013. In a company where the liability is limited by guarantee, it means the members of the company have agreed on the Memorandum of association to repay the same amount during winding up of such company. In such companies, the liability of the member is limited to the undertaking given by them. Example – trust, research association etc.

(c) Unlimited liability company.

According to section – 2(92) of the act a company not having any limit on the liability of its members is termed as unlimited company. Corporation with unlimited liability is rarely formed now. An unlimited company will get itself re-registered as a indebtness company underneath section – 18 of the act.

3. On the basis of numbers & transferability of shares

This is the another types of companies. The numbers of member in a company are looked upon while classifying them. It may be classified into:-

(a) Private company.

According to section – 3(1)(b) of the act are very restrictive in nature where in it may in its articles of association restrict the right to transfer of shares. The number of members in such a company might be a maximum of 50 member. The shares and debentures of such companies are not available for the public at large. The straightforward identification of private corporation is that the ‘Pvt. Ltd.’ attached to its name.

(b) Public company.

According to section – 2(71) of the companies act, 2013, Public companies are the one which is not a private company. As mandated under section – 3(1)(a) of the companies act, 2013, there should be at least 7 members to form a public company. It’s the intrinsic nature of the public company that there’s the proper to transfer shares and debentures of the public company to the public at gaint.

(c) One man company.

According to section – 2(62) of the act a company in which one person is the whole and sole owner of the share capital of the company is known as a one man company. In order to meet the statutory requirement of a minimum no. of members. Some namesake company shareholders holds one or two shares each. The principal shareholder enjoy all the profit of the business with the protective shield of limited liability.

4. On the basis of domicile

On the basis of domicile is also the another types of companies. On the basis of their domicile the company may be classified into:-

(a) Foreign company.

According to section – 2(42) of the act a company which is situated outside India but has registered place in India may be physical or electronic address or perhaps company has ownership itself or through the agents representatives or managers of the corporate is called as a foreign company. The aforesaid definition enclosed with in the new corporation act has widened the scope of the definition of foreign companies extending the similar to the entities having their electronic presence in India. Example – whirlpool of India Ltd., Times Group India ltd. Ambuja Cement ltd. etc.

(b) Indian company.

According to section – 2(20) of the act, 2013, any company registered under the companies act 2013 or any other previous law is known as an Indian company. An Indian company may prove its locus standi with the help of its office address and the legislation provides a guidelines to be followed while using such powers by an Indian company.

(c) Multinational company.

These kinds of corporation have production and selling facilities in different nations. Their ownership, control and management are spread in more than one country. A multinational company uses the following mediums for carrying out its business operation on a global level – branches, franchisees, turnkey projects, joint ventures, subsidiary companies. Example – coca cola, Dominos Pizza, Bata and Nestle etc.

5. On the basis of ownership and control

On the basis of ownership and control the company may be classified into the following:-

(a) Government company.

According to section – 2(45) of the companies act, 2013, any company in which a minimum of 51% of the paid up share capital is held by the central/State Government and held fractionally by the central government and partly by one or more state government is known as a government company. The foremost downside of getting a government company is that the lack of autonomy.

(b) Holding and Subsidiary company.

According to section 2(46) of the act, a holding company in relation to one or more companies means are subsidiary companies. In straightforward words, wherever a corporation has direct or indirect management over another company or other companies, the dominant company is known as the holding company.

Subsidiary company – the corporate within which the holding company has management in any of the subsequent that is control the composition of the board of administrators and exercises control on more than one half of its total share capital either at its own or conjunctions with one or lot of its subsidiary companies.

It should be noted that a company shall be deemed to be a subsidiary company of a holding company even if the control is exercised by the company of a holding company even one control is exercise by the another subsidiary of the holding company according to section 2(87).

(c) Associated company.

According to section – 2(6) of the companies act, 2013, are the one in which the other company has significant influence but these companies are not the subsidiaries of such influencing companies known as the Associated company. Example – joint ventures company.

The significant control can be inferred directly from the explanations attached to the provision which requires the influencing company to hold 20% of the share capital or any agreement where by the decision making of the associate is placed up on such influencing company. The associated company concept has been seen as a harbinger of transparency in working of the company since it provides a more rational grundnorm for an associated relationship between the two companies.

6. On the basis of access of capital

On the basis of access of capital is also the another types of companies. Companies on the basis term of access to capital are classified as follows:-

(a) Listed company.

According to section – 2(52) of the act a listed company is a kind of a company whose securities are listed on at least one of the stock exchanges. Such a corporation should suits the provisions of listing.

(b) Unlisted company.

When the securities of a private or public company aren’t listed on any of the stock exchange, it is an unlisted company. Such companies can not raise funds from the public at large by issuing a prospectus. However an unlisted company could issue shares on private placement basis or to raise private equity funding.

7. New kind of companies recognized under the act, 2013

This is the another types of companies. There are some new companies that are recognized under the act are as follows:-

(a) Dormant company.

According to section – 455 of the act where a company is formed for a future endeavors or to hold an asset which may be a physical or intellectual property and has no vital accounting transaction, such a corporation or inactive company will make an application to the registrar within the prescribed manner for getting the status of the dormant company.

The explanations attached to this provision states about the inactive company prescribing a period of 2 year of inactivity in terms of business transaction, operation etc or the companies which have not filed their annual return or the financial statement in the last two year.

(b) Charitable company.

According to section – 8 of the act a company whose sole objective is to promote, commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any other useful purpose and not having any profit motive will be termed as a not for profit company. Such a company must apply its profit or other incomes in promoting its objects. It mustn’t make any payment of dividends to its member.

(c) Nidhi company.

Nidhi company have been in existence right from the days of yore. Their primary objective is to support the habit of thrift. It had been promoted by public spirited men drawn from affluent native person, lawyers and professionals etc.

(d) Public financial Institutions company.

Life Insurance Corporation, Unit Trust of India and other such companies are treated as public financial institutions. They are essentially government companies that conduct functions of public financing.

(e) Small company.

As suggested by the Dr. JJ Iran committee, the conception of tiny corporation has been introduced within the companies act 2013. According to section – 2(85) small company means that a corporation apart from a public company whose paid up share capital of that doesn’t exceed 50 lakh rupees or such higher amount as could also be prescribed that shall not be over 5 crore rupees and turnover of that as per its last profit and loss account doesn’t exceed 2 crore rupees or such a higher amount as could also be prescribed that shall not be over 20 crores rupees.

(f) Investment company.

As per explanations (a) to section – 186 of the act, investment company means that a corporation whose principal business is that the acquisition of share, debenture or alternative securities. However, investment corporation in actual practice earn their financial gain not solely through the acquisition and holding however conjointly by dealing in shares and securities that’s to buy with a view to sale letter on at Higher prices and to sell with a view to buy later on at lower prices.

(g) Producer company.

According to section – 465(1) of the companies act, 2013 provides that the companies act 1956, and the Registration of Companies (Sikkim) act, 1961 (hereafter in this section referred to as the repealed enactments) shall stand repealed.  According to the provision as prescribed under section – 581A(l) of the companies act 1956, a producer company is a body corporate having object or activities specified in section – 581B and which is registered as such under the provision of the. The membership of producer company is open to such people who themselves are the primary producer which is an activity by which some agricultural produce is produced by such primary producer.

This Article is Authored by Deepanshu Ashava, 4th Year B.A.LL.B Student at IMS Law College, Noida.

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